David Taylor: The Minister referred to community safety partnerships' ability to urge the placing of cameras when the strict criteria are not necessarily in place. Is not it true that, on several roads the high speed and the amount of traffic travelling at excess speed discourage pedestrians and cyclists, and that it would, therefore, be reasonable to locate a safety and speed camera on such a road?

James McGovern: I thank the Minister for that response. He may be aware of a recent report from an organisation called Sea and Water, which suggests that, until road pricing is introduced, which would impose a fair charge on hauliers, there is a case for the Government to support more businesses that wish to transport their freight by sea. That view certainly has support in Dundee, where the Michelin tyre factory, which employs more than 600 people from Dundee and the surrounding area, has real concerns about the reduction in ferry crossings on the Rosyth to Zeebrugge route from five to three sailings a week. What plans do the Government have in the short-term to ensure a level playing field in the near future between businesses that transport freight by road and those that do so by sea?

Stephen Ladyman: My hon. Friend will realise that specific support for the scheme that he mentions would come under the responsibilities of the Scottish Executive, so I cannot comment too much on that, other than to say that the Department for Transport and the Scottish Executive collaborated to provide £11 million to start that ferry route. He makes a very fair point, however, that we must encourage the movement of goods by sea. Short-sea shipping needs to be considered as an important option for people who need to move goods. That is why we have the freight facilities grant scheme, which is making substantial sums of money available to people who consider short-sea shipping as an alternative to road transport.

Jim Murphy: Good afternoon, Mr. Speaker. The civil service has made good progress towards increasing diversity, including at senior levels, but there is still much more to do. We have published and are implementing the diversity 10-point plan. Its aim is to build on the progress so far to deliver a civil service that is truly representative of society.

Lyn Brown: I am grateful to the Minister for his reply. Does he agree that the lack of informal personal networks, and therefore a resultant lack of information about processes, can disadvantage communities? What does he think that we can do to make the playing field more equal?

Oliver Heald: But does the Minister agree that it would help the Government's diversity agenda, and the recruitment of women in the civil service, if there was a civil service Act to protect them from being asked to do things that they do not consider appropriate? Does he think that female recruitment and progression will be helped or hindered by the recent revelations from the Office of the Deputy Prime Minister?

Cyber security

Theresa Villiers: I beg to move, That the clause be read a Second time.
	The aim of the new clause is to ensure that husbands and wives continue to be free of the burden of inheritance tax when they transfer property to each other; to ensure that nothing in the Bill narrows the operation of the long-established spouse exemption from inheritance tax in section 18 of the Inheritance Tax Act 1984; and to ensure that all transfers covered by section 18 before Budget day will continue to be covered, regardless of other provisions in the Bill, including schedule 20. I am not sure that the Government are minded to accept new clause 1, but if they do so, my hon. Friend the Member for South-West Hertfordshire (Mr. Gauke) will wish to move amendment (c). The Opposition are happy to support that amendment, and hope to press the matter to the vote, as it has the same general goal as new clause 1, but has more watertight drafting. In the unlikely event that new clause 1 and amendment (c) are accepted there would still be a number of significant problems with schedule 20, to which the Opposition propose to return in Committee.

Theresa Villiers: The hon. Gentleman makes a very good point, which I have already taken on board. In my view, section 103 of the Finance Act 2005 means that new clause 1 covers civil partners as well. Essentially, section 103 and the related delegated legislation give civil partners in this context the same rights as spouses. If we solve the problem for spouses, we automatically solve it for civil partners, too.
	The Opposition believe that it is vital to save the spouse exemption for husbands, wives and civil partners for the reasons that it was introduced in its present form by the Callaghan Government in 1975—to reflect society's concern for the welfare of bereaved spouses, and to mitigate severe hardship when matrimonial homes had to be sold to pay the tax bill. There are two new modern reasons to reinforce the need to retain the exemption. The first has already been raised by the hon. Member for Rhondda (Chris Bryant). It is important to preserve the spouse exemption for civil partners, to whom it has only just been granted. As I said, if we are successful today in protecting spouses, section 103 of the Finance Act 2005 will protect civil partners. Secondly, rising house prices, particularly in London and the south-east mean that many more middle-income families are caught by inheritance tax, and could therefore be hit by the changes in the Bill.
	The Law Society recently conducted a survey asking its members which of their clients would be affected. I shall quote just a few of the answers. They were people from
	"every walk of life—teachers/nurses/engineers/computer professionals/office workers/ bank staff/engineers/manual workers—anyone who lives in their own home in the South of England . . . police officers . . . Civil servants, local government officers, doctors . . . shopkeepers: retired people of moderate means who have been prudent . . . office managers . . . self-employed small business men and women (taxi drivers, carpenters, joiners, plumbers, builders, decorators). Ordinary families working hard to pass saved income to children. Second-marriage couples with an average-priced property wishing to make flexible arrangements for spouse and children. All types, not necessarily high earners but prudent savers and budgeters. Any couple with a 3 bed detached or 4 bed semi who have young children. Regular middle income earners. A whole range of ordinary people—people who have tried to work hard and save for their children's future.

Theresa Villiers: We are not talking about the bands of inheritance tax—that is not the debate—but about new additional and penal inheritance tax charges that will apply to circumstances that are now altogether free of inheritance tax.
	On Second Reading, the Paymaster General said that the measures on trust proposed in the Bill were aimed at preventing "wealthy individuals" from
	"using trusts . . . to shelter their wealth from inheritance tax."—[Official Report, 24 April 2006; Vol. 445, c. 460.]
	However, trusts seldom give rise to any tax advantages whatever; they are generally tax neutral. As the impressive coalition of professionals campaigning against these measures has pointed out, the trusts penalised by the Bill are generally motivated by unobjectionable non-tax objectives: family and social objectives, which will become prohibitively expensive as a result of the proposed measures.
	Since estate duty was introduced in 1894, trusts have received broadly the same tax treatment as outright gifts. For example, under current rules, a gift on a flexible trust to a spouse, with the remainder going to children at the age of 25, is taxed in the same way as an outright gift of the property to the spouse, which is then passed on to her children on her death. Thus, the tax exemption means that no tax is charged on the first death, but the capital is charged at the full rate when the surviving spouse dies and the property passes to the children.
	Far from removing some sort of privileged status, as the Paymaster General claimed on Second Reading, the Government are effectively proposing to introduce additional new and penal tax charges on trusts, treating them more harshly than an outright gift. The Chancellor is actually tearing up a 100-year consensus, repeated only recently by the Revenue in its attempt to maintain a tax system for trusts that does not provide artificial incentives to set up a trust, but equally avoids artificial obstacles to using trusts where they would bring significant non-tax benefits.
	Before Budget day, section 18 of the Inheritance Tax Act 1984 exempted gifts on trusts to spouses in exactly the same way as the system operated for outright gifts and transfers. Unless the Bill is amended, it will become almost impossible to set up a trust for a spouse without losing the exemption, as it will incur an immediate inheritance tax charge on the death of the first spouse. The spousal exemption will survive only in cases falling under the definition of an immediate post-death interest, complying with six very narrow and restrictive conditions set out in the new section 49A of the 1984 Act, as proposed in schedule 20.
	No one has yet been able to say with certainty how the six opaquely drafted conditions will apply in practice. It seems clear that severe problems will be caused by conditions 1, 3 and 4. Condition 1 states that the gift must take effect by will or intestacy. That means that spouses will no longer be able to set up trusts for one another during their life time without incurring the new charges. A particular concern is that it is not clear that condition 1 will be satisfied where a trust has been established not under a will, but under a pension policy or death in service arrangements, leaving the threat of the new charges applying in those circumstances.
	Condition 3 requires that the power to terminate the surviving spouse's life interest is exercised only by the spouse or with the spouse's permission. That sounds technically innocuous, but the net result is that a significant number of trusts created on divorce would fall outside the provisions of condition 3, with the risk of the new charges applying.
	Condition 4 provides that the life interest for a surviving spouse will qualify for the exemption only if, following its termination, assets pass absolutely to the beneficiaries. With very limited exceptions, if the property remains in trust after the death of the live tenant, the spouse exemption will not apply. The net effect of those conditions is that, if there is any flexibility in the trust, the spousal exemption is lost and a bereaved spouse or civil partner will face an immediate inheritance tax bill.

Chris Bryant: The hon. Gentleman can speak for his constituency, but I dare to suggest that if he considers the whole country, his statement that 50 per cent. of estates will be valued at more than £325,000 in the next few years is a gross exaggeration.
	When the hon. Member for Chipping Barnet gave her list of teachers, fire officers and others, she appeared to suggest that all of them—every teacher in the country—will suddenly have to put together a new will and a new trust. She clearly has not met teachers in my constituency, or in the majority of constituencies, who will not get anywhere near the £325,000 figure. Consequently, her comments constitute a bit of scaremongering, which is an inappropriate approach to the Bill.
	Secondly, the reason for my opposition to new clause 1 and my wholehearted support for the Government's proposals is that there are two alternative directions of travel in which we can move on inheritance tax. One is to undermine inheritance tax—not necessarily by pledging to abolish it, but by suggesting that one disagrees with it and would like to abolish it even if one does not have the gumption to say so. On the other hand—I may be about to step into old-fashioned shoes—some of us believe in inheritance tax for the simple reason that the greatest source of inequality and inequity in British society is inherited wealth. If we do nothing, especially when the wealthiest in our society are doing extremely well, to undermine the progress towards greater inequality, we undermine the fabric of the society in which I want and choose to live.
	The hon. Lady was wrong to table new clause 1. We need to do what the Government propose and try to ensure that there are not many different ways of exempting oneself from inheritance tax and that there are not ways that are especially available to the wealthiest in society, who can afford expensive consultants on tax and other matters.

Chris Bryant: No, no—the right hon. Gentleman misunderstands the economy of south Wales, just as he did when he was Secretary of State for Wales. I must point out to him that there are more people in paid employment with good prospects today because of the national minimum wage, which he opposed. However, if I continue in that vein, Sir Alan, you will tell me that I am straying somewhat from new clause 1, and I did promise to draw my remarks to a close fairly swiftly.
	Inheritance tax is about paying a fair share, and the proposal by the hon. Member for Chipping Barnet tries to undermine the concept of a fair share. We are right to oppose new clause 1.

Julia Goldsworthy: As I said, the system will be fairer and simpler. The hon. Members for Rhondda (Chris Bryant) and for Chipping Barnet (Mrs. Villiers) do, in fact, agree on something. Fundamentally, the issue raised by new clause 1 is that of spouse exemption and whether that is changed by the Bill. There is a real lack of clarity, and all the new clauses and the amendments to them are intended to make the situation clearer. Even if the Paymaster General argues that it is already clear, members of the public and professionals have a different interpretation of what the regulations mean.
	I can see the good intentions of new clause 1, but its argument is slightly circular—that anything exempt under the new Act will continue to be exempt—and does not make sense. The amendment tabled by the hon. Member for South-West Hertfordshire (Mr. Gauke) improves his Front-Bench team's phrasing and overcomes that tautology. New clause 2, tabled by Liberal Democrat Members, extends that and calls for a further period of time to be elapsed so that the implications of the legislation can be made absolutely clear, not least for individuals who have died since the Budget either intestate or with their will written into trust. At the moment, the cases of those individuals are subject to considerable uncertainty. I am glad that the hon. Member for Rhondda approves of amendment (b), which, for the avoidance of any doubt whatever, makes it clear that civil partners will also fall under the spousal exemption.
	New clause 2 seeks a delay in the implementation of the Act until its impact is fully assessed and understood. Debate in the House and outside shows continuing disagreement about the extent of that impact. Making it explicit that a full consultation will take place would be appreciated, as that did not happen before the proposals in the Bill were put forward. I understand that a partial regulatory impact assessment has been undertaken, but the new clause would ensure that there would be a full regulatory impact. Would the Paymaster General be prepared to publish that partial regulatory impact assessment before the relevant clauses are considered in Committee? Will she also provide longer-term projections of the revenue that she estimates the measures will gather? The Red Book gives only a limited time scale and shows that, according to the Government's estimates, the amount of money will be small. Clearly, the professionals think that the opposite might be the case. All the measures in new clause 2 would help to inform the public and make clear what the impact and the revenue implications for the Treasury will be.
	As I said, new clause 3 echoes the theme of the amendment tabled by the hon. Member for South-West Hertfordshire and extends it. As well as making it absolutely clear that there will be no retrospection for applied transfers of value written into trust made prior to 22 March, it makes provision for people who have died intestate with dependants since 22 March. Currently, their estates are in limbo, and it is not clear how the new regime will apply to them. Fundamentally, it preserves the existing rules of exemption for two years until the new system and its implications are fully established. It also sorts out what happens in relation to people who die in the intervening period.
	Surely the fundamental anomaly is that, under the existing regulations, someone can still make a lifetime gift free of inheritance tax if they do not die within seven years. That has not been redressed by the Bill. The changes proposed by the Bill impact on people who are not cash-rich, cannot make cash gifts in kind and thereby avoid inheritance tax, and have houses that have increased greatly in value in the many years that they have lived in them. In my constituency, for example, average house prices are increasing so rapidly, and the gap between house prices and incomes is so great, that more and more households are falling into inheritance tax.
	Can the Paymaster General be explicit about what mischief has been done that the Government are trying to overcome, and about their assessment of the impact of any avoidance under the existing trust regime? Will the Government respond to the Treasury Committee's request that they should provide detailed information about how they arrived at their estimate that the new rules on the tax treatment of certain trusts will affect only a "minority of a minority" of the 100,000 discretionary trusts? Will they do that before clause 57 and schedule 20 are considered in Committee?
	If, as the Government claim, existing spouse exemptions and other reliefs from inheritance tax will continue to apply when a trust is set up in the case of an individual with dependants dying intestate, can they explain why the professionals beg to differ? Can they specify where that is explicit in the Bill, and can they clearly demonstrate why the new clauses and the amendments to new clause 1 are not necessary? Along with the professionals and many members of the public, I would welcome more clarity, certainty and evidence-based policy-making in this regard.

John Redwood: I do not think that that is true; indeed, there are many examples to the contrary. I have not inherited any wealth up to this point and I do not have great prospects in that regard, but I do not begrudge those who come from much richer families than mine doing so. If that money trickles down through the generations, it very often does far more good than if it trickles into the sticky hands of the Chancellor of the Exchequer, which seems the only alternative on offer in today's debate.
	It would be much better if the inheritance tax system recognised that a person is not very rich just because they have a flat or house that might now be worth a lot of money. There are a number of elderly residents in Kensington and Chelsea living in two or three-bedroom flats that are perhaps worth the best part of £1 million who might be on quite low incomes. Is the Labour party saying that those people must move to realise their asset and to show that they have some wealth? I want to live in a country where, if such people want to carry on living in their two-bedroom flats, they can do so. They should not be treated as rich because, even though they are low incomes and have no other assets to pay all the taxes that Labour now wants to impose on them, they happen to live in a part of the country that has rather high flat and house prices.
	I hope that the Paymaster General will deal with the inequality of house prices nationwide, which is not always, as Labour seems to imply, good news for those in high house price areas. Such people could be worse off than those in low house price areas because they have to pay a disproportionately higher proportion of their assets and income in order to secure and maintain their property. In other words, the principle can work in the opposite direction.
	The final issue is what should happen in future. If the Paymaster General can persuade us that there is no effective element of retrospection and that there is an injustice to tackle, we have then to test whether she has found a route to tackling the injustice and inequality that she sees, and whether she would do so in a way that would make Britain a more prosperous and equal society. I suspect that she will achieve the opposite of what she wishes to achieve.
	I do not want to live in a country where only the super-rich can prosper by—thanks to their access to the really good lawyers—finding a way around the more complicated regulations that the Government have come up with. I do not want to live in a society that sends out the message that it is better to go offshore or live abroad. I know that offshore trusts have been popular with some Labour donors and Ministers, but they are not a particularly good thing to encourage. It is much better to have an honest, low-tax system that is the same for everybody, and which encourages more enterprise and success.
	I hope that the Paymaster General with think twice, three times or however long it takes and understand that her proposals contain several objectionable parts. First, retrospection will disrupt family arrangements. Secondly, the suspicion that all trusts are evil tax dodges is clearly not true. Thirdly, on the Paymaster General's idea that such complexity will squeeze the rich and help the poor, I suspect that the rich will escape because they will have access to good lawyers and accountants and can always go offshore. In short, I urge the Government to drop this proposal.

David Gauke: I had hoped that we might find a few areas of consensus on this issue. There is clearly a range of views on inheritance tax, but I disagree with the hon. Member for Rhondda (Chris Bryant), who suggested that the new clause is an attack on the principle of IHT. Not all my colleagues will agree, but I think that there is a role for inheritance tax in our system. It may not apply to many people in the Rhondda, but it does to a lot of people in South-West Hertfordshire. The rate may also be open to question, but I do not disagree with the basic idea of inheritance tax.
	In addition, the saloon bar wisdom is that wealthy people get around paying inheritance tax by using trusts. I see nothing wrong with trying to address genuine tax evasion; wealthy people should not be able to evade the tax when ordinary people in South-West Hertfordshire, Falmouth and Camborne or anywhere else are stuck with the liability.
	As my hon. Friend the Member for Chipping Barnet (Mrs. Villiers) said, the Government have expressed the view that, essentially, trusts should be tax neutral, and I support that. As she also noted, the Revenue's policy in reforming the income and capital tax treatment of trusts has been to create
	"a tax system for trusts that does not provide artificial incentives to set up a trust but, equally, avoids artificial obstacles to using trusts where they would bring significant non-tax benefits."
	I see nothing wrong with that. Since 1894, when estate duty was introduced, certain types of trust have been equated with outright ownership, and taxed accordingly.
	Perhaps the Paymaster General will correct me if I am wrong, but I believe that there is a consensus about the value of the spousal exemption. As my hon. Friend the Member for Chipping Barnet said, it was introduced in its current form in 1975, but in some form or other it dates back to 1896. The need for the exemption is easy to understand; in most cases, an inheritance leads to a windfall, but a death usually results in a fall in income and an element of hardship for the surviving spouse.
	In addition, there is usually a shared family home. Given the emotional concerns that follow a loss, it would be unduly harsh for a spouse to have to sell a house to pay an inheritance tax bill. Clearly, the particular circumstances of spouses need to be considered, and the Civil Partnership Act 2004 has extended the number of people in that category. We need to ask a couple of questions about the Bill. Does it continue to apply to tax trusts in the same way as to outright gifts, and does the spousal exemption continue to apply?
	The Government might argue that the spousal exemption will apply in respect of immediate post-death interests, but the professional advice that I have seen maintains that that will not work because, in practice, it is almost impossible to meet the conditions. Moreover, it is held to be
	"nigh on impossible for one spouse to leave their estate in trust for the other and obtain the spouse exemption."
	As my hon. Friend the Member for Chipping Barnet pointed out, there are specific conditions in the draft proposals in respect of inheritance tax that make it very difficult for most trusts to work and still obtain the spousal exemption under the immediate post-death interest definition. Condition 3 requires that the surviving spouse interest can be ended only during her lifetime with her consent. Consequently, a will that states that the surviving spouse has a right to live in a house until remarriage, when the assets pass to the children—the experts say that that is fairly common—will breach that condition and will not be able to benefit from the spousal exemption.
	Condition 4 states that, on termination of a surviving spouse's interest, a person will become entitled to the capital outright. However, if the trustees have the right to defer a child's absolute entitlement—again, that is fairly common—then that condition is breached and the spousal exemption is not available.
	The immediate post-death interest conditions prohibit flexibility, the need for which was questioned earlier. Again, my hon. Friend the Member for Chipping Barnet dealt with that very well. Complex family arrangements are best dealt with through flexibility. We have heard about the case of a widowed second wife, where there are children from the first marriage, which even the hon. Member for Rhondda acknowledged was an issue. There also cases such as that of a young widow who is expected to remarry and have more children; a widow and children with special needs; a childless marriage where both spouses want their assets to go to their respective nephews and nieces; where a property is complex and may impose management demands best performed by trustees rather than the widow; or where a testator has less than full confidence about the distribution of the property.
	Those are all legitimate, reasonable circumstances that a trust is able to address. The trust is a great intellectual achievement of English law and it seems a great pity to dismiss it as the Government seem to be doing. They seem to have a prejudice against trusts as a method of addressing those issues, which relate not to tax evasion or tax minimisation but to personal circumstances.

David Gauke: I am inclined to believe specialists who work extensively in the field—[Interruption.] If the civil servants had consulted a little more widely—although that is another issue—we might not have found ourselves in these difficulties.
	I think that the Government's great concern is that a widow could receive a life interest, terminate the trust and make a lifetime gift and, if she survived for seven years, benefit from provisions relating to potentially exempt transfers. I should be interested to hear from the Paymaster General about the particular difficulties that she considers exist and where the current spousal exemption is being abused. However, as my hon. Friend the Member for Chipping Barnet rightly pointed out, the Government's proposals are an ineffective way of addressing their concern. Better ways could be found by looking at the potentially exempt transfer route, which would address the matter much better than using such an over-sized sledge hammer to hit that particular nut.
	I wait in anticipation to hear whether the Paymaster General will argue that one can always vary a trust on death, thereby resolving many of the problems or injustices. However, such a solution requires both that the trust is one that can be varied and a degree of flexibility, which is clearly not something that the Government want to encourage in trusts, although it would be useful in those circumstances. Variation could also be achieved with the consent of the beneficiaries, but that would not be possible if they were minors. In that case, it would be necessary to go to the court, with all the expense that would incur. If the Government chose to use that argument, it would not be persuasive.
	The Government say that the provision will affect only a few people and several Labour Members have suggested that it would apply only to a tiny minority of the wealthy. However, over the past few days, I have been bombarded with documents produced by professionals pointing out that they regularly advise the inclusion of a trust in fairly normal wills, and that it is a common, run-of-the-mill device used to protect a family and to address particular family circumstances. As a matter of course, trusts are involved in wills, not for taxation reasons, but because they provide flexibility. The Government appear not to know that, and the fact that they fail to do so suggests a lack of consultation, which has marked the process throughout.
	Why have the Government done this? Perhaps saloon bar wisdom and the lack of consultation means that they were not aware of the problems that they have caused, but I wonder whether another element is involved, so I want to offer one or two friendly words of warning to the Labour party. The whole approach smacks of a good old go at the toffs, and we have heard one or two comments along the lines this afternoon that just the wealthy and rich are affected, that the policy does not really matter and that it will play quite well perhaps back in the Rhondda.
	The Labour party has been extremely successful in the past three elections, and one of the reasons is that the Prime Minister has managed to distance himself from the perception that the Labour party is a bunch of class warriors. Not for the first time, the Chancellor of the Exchequer has waded in and tried to play the class card, just as he did with Laura Spence and Oxford university, when he rushed in and got the facts wrong, did not understand the matter and rather embarrassed himself. I fear that the Government and the Chancellor have done exactly the same thing with this policy. They think that they have made an attack on the very wealthy and the privileged few, when the reality is that large numbers of ordinary people, not the wealthy, will be affected by this policy. The Government have made a misjudgment, and I suggest that they back off; they could start today by accepting the new clause.

Brooks Newmark: I am getting the sense that I am in a minority in the Committee as I do not have a legal string to my bow. However, my lack of legal training gives me a distinct advantage when it comes to new clause 1, and amendment (c) to it, because I can, at the very least, appreciate the value of clarity. The new clause is a simple appeal for certainty in a Bill that contains less of that quality than might be desired. The number of people who may be affected by the proposed changes to the taxation of trusts has given all hon. Members cause for concern.
	Perhaps my closest brush with the law on wills and trusts comes from "Bleak House", which provides a useful parallel to the Government's proposals. The catalogue of potential beneficiaries at the heart of Jarndyce and Jarndyce, where inheritance is squandered, indolence encouraged and legal proceedings interminable, bears close comparison to the lists of those who stand to suffer, if the proposals that we are considering are carried into law—namely widows, minors and the vulnerable.
	Indeed, Finance Bills as a whole have more than a passing similarity to Jarndyce as Finance Bills
	"in course of time become so complicated that no man alive knows what it means"
	and nobody
	"can talk about it for five minutes without coming to a total disagreement as to all the premises."
	The Dickensian fog may have lifted from the Chancery courts but it still sits heavily on schedule 20 and particularly on proposed new section 49A of the Inheritance Tax Act 1984. The Government should be committed to the principle of proportionate rather than punitive taxation, and that commitment is not clear in these provisions.
	New clause 1 has a modest aim: to ensure, setting aside all other confusions, that no inheritance tax will be payable on transfers of value between spouses, and not as the hon. Member for Rhondda (Chris Bryant) would have us believe, to avoid inheritance tax completely. The spousal exemption exists to prevent punitive double taxation of an estate. That is a sound proposition, founded on an inoffensive principle. It has, as my hon. Friend the Member for Chipping Barnet (Mrs. Villiers) said, been the subject of consensus since capital transfer tax was introduced by the Labour Government in 1975. The Chief Secretary echoed the need for just such a principle when he spoke on Second Reading about the need to ensure that people pay their fair share of tax. I know from my brief experience in consideration of the National Insurance Contributions Bill that that particular Labour mantra is very much in vogue. The Paymaster General used it four times in one speech. I am glad that she has taught it to colleagues on the Treasury Bench, but the mantra is as nebulous now as it was then.
	The use of trusts as a vehicle for asset protection has made them the target of another Dawn raid because they are perceived as being unfair. The fact that trusts exist to protect assets from more than the taxman does not seem to concern the Government overmuch. It is true that the caveat for those suffering from a disability has been preserved, but only for a very limited class of beneficiaries in which no one can be thought of as vulnerable if they are not first found incapable under the Mental Health Act 1983 or are claiming disability benefits. That is a sop to fairness, but in reality it is deeply regressive and inflexible. It takes care of the mad, but not the bad or the sad. It also fails to draw the sting of schedule 20 because fairness has always been at the heart of trusts.
	Most often the very reason why trusts exist is to allow for flexible and equitable distribution of assets in the face of changing and unforeseen circumstances. The Government have been keen to acknowledge that trusts have a positive role to play in assisting people to manage their tax affairs, and in particular in holding assets on behalf of vulnerable people. However, vulnerability is not linked, and never has been, exclusively to disability.
	Members of the legal profession made a number of representations to me on the many beneficial effects that trusts may have in restraining a Rake's Progress or in keeping a fool and his gold well acquainted. Many sound arguments that relate to the age at which the interests of younger beneficiaries should vest regrettably go beyond the scope of new clause 1. No doubt, the issue will be revisited in Standing Committee. However, I regard beneficiaries under a trust as vulnerable if their interests would not be adequately protected without that trust.
	That point becomes germane in the context of new clause 1 if we consider the number of trusts created at present to protect the interests of children in the event that a parent should remarry. That is a common situation, and it is merely one item on the exhaustive list given by my hon. Friend the Member for Chipping Barnet. As a result of the proposal, many older testators may begin to favour outright gifts to their surviving spouse, rather than risk settling assets on trust, which may fall foul of the spousal exemption and be liable to inheritance tax. Such outright gifts do not allow any measure of flexibility. Furthermore, they do not allow testators to be sure that their children will be provided for if the surviving spouse should decide to favour the other's interests over theirs. Children in that position are undoubtedly vulnerable, so we must ensure that they are protected as before.
	Sadly, that state of affairs is not unforeseeable, and it is a nightmare scenario for anyone trying to provide responsibly for a family. Modern matrimonial arrangements are complex, but there should be no doubt about whether people with multiple families will continue to benefit from the existing spousal exemption. We would not want to be responsible for encouraging an epidemic of wicked stepmothers if the provisions encourage the use of outright gifts to the detriment of the prudent protection of children. New clause 1 clarifies interference with the taxation of trusts, which is invidious in principle and may prove unworkable in practice.
	Trusts and their taxation are not a subject on which I profess expertise, yet I can readily understand the implication for the average prudent family of any interference with the spousal exemption. The objective of new clause 1 is to offer simple peace of mind to the many people who may be affected by the proposals. Even the legal profession is uncertain about the runaway scope of the changes, and I am more worried about the uncertainty than I am about mere outrage, although we have seen evidence of both. The Law Society, the Chartered Institute of Taxation, the Society of Trust and Estate Practitioners and many other professional bodies have pleaded for clarity. New clause 1 would achieve it by including in the Bill an assurance that surviving spouses will not be subject to inheritance tax if their affairs are structured to maintain flexibility and protection for others.

Stewart Hosie: I am not a tax accountant or a lawyer, and, given the nature of our debate, I am grateful that I am not. I am grateful, too, for the briefing that right hon. and hon. Members have received from the Law Society of Scotland. I shall ask the Paymaster General a number of questions at the end of my speech, as Members on both sides of the House are deeply concerned about the legislation's impact, intentional or unintentional. The Chartered Institute of Taxation said that
	"all the professional bodies hope that HMRC and the government will listen to our representations and modify the proposals to ensure that spouses and civil partners remain exempt and that young and vulnerable people can continue to be protected through trusts without suffering a financial penalty."
	Similarly, the Law Society president said:
	"This measure will affect millions of ordinary people and not just the very wealthy that the Government claims to be targeting."
	The briefing helpfully suggests that it is anomalous that wills involving trusts for the spouse should attract more tax than wills without trusts:
	"If no trust is made, no inheritance tax is due until the death of both spouses in a marriage (or partners in a civil partnership). But under the new proposals, if a trust is made, inheritance tax could now be due . . . after the death of the first spouse and again after the death of the second."

Dawn Primarolo: Of course, I shall come to that. I took part in a debate with one of the hon. Lady's colleagues earlier today and I find the Liberal Democrat position inconsistent and daft. This morning, her colleague argued that the Liberal Democrats want to narrow income inequality, yet this afternoon, she argues that she is happy for it to be perpetuated for the few who hang on to their money through the sort of wills that we are considering.
	The hon. Member for Grantham and Stamford rightly asked whether the Government were against trusts. He made an important point, and I would like to take this opportunity to clarify the situation. Of course the Government have not suddenly taken against trusts. He knows full well that we are talking about two particular types of trust. We believe that trusts have an important role to play in helping people to manage their affairs—of course they do—but we also believe that a person's choice whether to use a trust structure should not be tax driven. That should not come as a huge surprise to the hon. Gentleman in the light of the changes that this Government have already made to trusts in previous Finance Bills.
	I hope that the hon. Gentleman would agree that it is unfair that some people exploit the trust rules in order to avoid inheritance tax. The right hon. Member for Wokingham (Mr. Redwood) made a similar point earlier. The Government are not labelling respectable people as tax avoiders. We are saying that a system has emerged in which two types of trust—accumulation and maintenance trusts, and interest in possession trusts—can, in certain circumstances, be configured to provide an unfair tax advantage at the expense of other taxpayers. That is what we are seeking to put right.

John Bercow: rose—

Dawn Primarolo: I will give way to the hon. Gentleman, as I said that I would.

John Bercow: I am a bit suspicious. I have a high regard for the Paymaster General, but she treated a serious and thoughtful inquiry from my hon. Friend the Member for Chipping Barnet (Mrs. Villiers) as an opportunity to launch into a stream of rather unnecessary invective. May I ask the Paymaster General a simple question? Is she seriously saying that it is ordinarily possible for someone to alter the terms of an existing trust as quickly, simply or inexpensively as that person could alter his or her will? That was the gravamen of the question that my hon. Friend asked, and it deserved a more serious response.

Dawn Primarolo: People have two years in which to ensure that there is a proper end to a trust. In that sense, such trusts are affected; otherwise, it would be a bit like our saying "Just because you have already successfully planned a tax avoidance, we will leave it in place."
	It may help the Committee if I explain the purpose of the measure and what it does before dealing with the new clauses. As I have said, the purpose is to stop inheritance tax avoidance through the use of certain types of trust—not all trusts. Before the Budget, it became clear that some wealthy individuals were using trusts in that way. The avoidance worked in different ways, and was often highly technical, but the end result was the same: substantial assets passed from generation to generation with no inheritance tax ever being paid.
	I have made it clear that the Government consider it unfair that a small number of wealthy people should be able to exploit trusts in that way by combining rules. The new rules prevent such unfair avoidance, while protecting straightforward and sensible arrangements made by honourable people.
	This measure brings accumulation and maintenance trusts and interest in possession trusts into the mainstream tax rules for discretionary trusts. It does not, therefore, create a new regime; it merely brings such trusts into the regime that applies to all the others. The money put into a trust during a person's lifetime—

Dawn Primarolo: No; please let me make some progress on these points.
	Transferring assets into trusts is very different from making an outright gift; some people have tried to argue that they amount to the same thing, but they do not. The recipient of an outright gift can do with it as they please, with or without the consent of the person who made the gift—they are the absolute owner. However, if a person places money in a trust, it must be used by the trustees in accordance with that person's wishes. It is the fact that control can continue long after the settlor's death that makes the difference.
	Inheritance tax rules for interest in possession trusts have conferred the same exemptions that would apply if putting assets into trusts were identical to making an outright gift. The result has been that interest in possession trusts can be—and regularly are—used as a highly flexible money box and a long-term shelter from inheritance tax liabilities. That usually requires the settlor to get rid of assets in his lifetime but, where the spouse relief is available, it is possible for the settlor to hold on to his assets until death and completely wipe out any inheritance tax liability, in both the present and the future—all without giving the surviving spouse or civil partner any influence whatsoever over the assets in their name.
	Of course, some cases are not avoidance driven, and a number of exemptions provide appropriate protection for the people involved. First, spouse relief will continue where an interest in possession trust is set up in a person's will to give a life interest to a bereaved spouse or civil partner provided that, when such interest ends, the assets are taken outright by someone else. No further flexible power is necessary in the trust, because it has delivered its objective.

Dawn Primarolo: Prior to 6 April 2006, employers who made computer equipment available for private use by their employees could do so tax free, providing that the annual amount of the benefit in kind was £500 or less—that is the equivalent of £2,500 of computer equipment, inclusive of VAT. The clause removes that tax exemption. With effect from 6 April 2006, a tax charge will arise on the benefit in kind that arises in those circumstances. However, the clause does not change the position when an employer provides the use of computer equipment solely for work purposes and private use by the employee is not significant.
	The question that everybody has been asking is: why are the Government doing this? It is perfectly true that many employees have benefited from the tax exemption, but the home computer initiative has been used extensively by groups that we would not generally expect to have difficulty accessing information technology. For example, 25 per cent. of those participating in the home computer initiative are higher rate taxpayers—more than twice the proportion among taxpayers as a whole. Furthermore, nearly one third of HCI participants are from white-collar industries—often defined as industries with a greater proportion of higher-than-average earners.

Dawn Primarolo: The information comes from the industry. The hon. Gentleman interrupted me rather early on in my remarks. I was certainly not saying that nobody had benefited from the HCI scheme. The case that the Government are putting is that the benefits have slowed down to a point at which the growth is very small. In particular, it is not targeted on the remaining groups that we need to assist—those on low pay. I was just about to turn to that point.
	Last month, the Low Pay Commission published the findings of its review of benefits in kind, salary sacrifice schemes and the accommodation offset. It found that take-up rates were often quite low and many part-time low-paid workers would gain no advantage from salary sacrifice schemes for home computers and other benefits in kind. Her Majesty's Revenue and Customs has evidence that, unfortunately, the tax exemption was being used beyond the scope of its original intention.
	On the one hand, the initiative has reached a number of people and has increased usage. On the other hand, however, it is not targeted particularly at the low paid and its effectiveness has been slowing down, and, in addition, it is being used beyond its original intention. For example, the HCI packages included items such as game consoles and MP3 players and allowed employees to buy equipment out of their gross pay, rather than borrow it. Furthermore, the cost of computer equipment has fallen markedly since 1999 when—

Mark Francois: I agree with my hon. Friend. We are looking to the Government this evening for some indication, when the Paymaster General replies, that they intend to retain the scheme, even in a modified form. We are not saying that there can be no change. However, we want an indication from the Minister that if the Government believe that there is abuse, they will modify the scheme to respond to that while maintaining its inherently positive characteristics. I shall press the Paymaster General on exactly that point in a moment.
	The scheme has proved popular, with about half a million people taking advantage of it effectively to hire a computer from their employer to help to improve their IT skills as part of a modern knowledge-based economy. This is especially important when we are seeking to improve IT skills to allow the UK to continue to compete with economies such as China and India in the 21st century. According to a recent analysis carried out by Hewlett-Packard, China and India between them now produce more than 120,000 IT graduates each year. How are we to compete effectively with that if we are bringing in measures to reduce the spread of IT literacy among our population, which is what the proposed change threatens to do?
	A Cabinet Office press release was timed to coincide with the launch of the new initiative in January 2004. It highlighted survey findings that employees with a PC at home had better IT skills and were more familiar with the internet. The DTI guidelines on HCI were entitled, "Maximising Potential in the Workplace". Along with advice on implementing the scheme, numerous references were made to skills. For example, in the CBI's booklet, Sir Digby Jones was quoted as follows:
	"Of all the workforce skills required today, there's no question that basic IT literacy is one of the most important . . . Getting IT into the DNA of the workforce must therefore be a primary objective for every organisation that wants to adapt to the high-skills economy of the future."

Mark Francois: If the Paymaster General had done me the courtesy of listening, she would know that I explained that between 1999 and 2003 the scheme was relatively unpopular, so the Department of Trade and Industry effectively rebooted and relaunched it in 2004, with clearer and better publicised guidelines. The scheme has now begun to take off, and 0.5 million users around the country are dependent on the scheme. It is rather worrying that the Paymaster General—a Treasury Minister—will not listen to basic statistics.

Mark Francois: I agree. The Chancellor said little about the initiative in his Budget speech but, equally, he said little about the national health service. However, he evidently tried to hide what was being done. Our role in the House is to try to expose that, and then try to persuade the Government to change their mind.
	There was adverse reaction from employers who have promoted the scheme to their employees, as the Government encouraged them to do. Andrew Unsworth, the head of e-Government at the City of Edinburgh council, which is Labour-run—at least until Thursday—sent the following e-mail this morning. [Interruption.] That would be lucky for the Labour party. Mr. Unsworth said:
	"City of Edinburgh Council has run two very popular schemes for our monthly staff since March 2005. Take-up rates were over 2000 employees, nearly 16 per cent. of those eligible.
	We were preparing to launch another scheme making computers available to our weekly and fortnightly paid staff who are predominantly on lower rates of pay. These pay groups may not otherwise be in a financial position to afford computer equipment. We viewed this as an excellent way for employees to benefit from a computer and its educational properties for both them and their families."
	He continued:
	"This scheme provided an excellent platform to improve literacy, communication skills and overall education for employees and their families. City of Edinburgh is currently introducing more computers to schools and several staff had indicated that they were participating in this scheme for the benefit of their children.
	City of Edinburgh Council have followed the HCI guidelines very closely and only included computer packages in their scheme. I would hope that the government would consider reversing its decision in this matter even if it means tightening the guideline to prevent the alleged abuse of the scheme."
	Similarly, Mike Clayton, finance director of Essex fire authority, wrote to me on the 24 March:
	"Take up for the scheme was excellent with over 1 in 5 employees joining. The level of take up was particularly high for firefighters where over 1 in 4 chose one of the computer packages available."
	Mr Clayton amplified his point:
	"15,000 nurses took up the scheme last year. Many low paid nurses, fire officers and other key workers have access to IT for the first time because of HCI. Given the importance of computers in the lives of nearly all citizens, I hope that this proposal can be withdrawn and the take up of computers extended."

Mark Francois: I have given way several times to the hon. Member for North Durham (Mr. Jones) and I want to make some progress. I may give way later to the hon. Member for Wirral, West (Stephen Hesford), particularly given that we greatly enjoyed his intervention on my Second Reading speech last week.
	I move on now to deal with the reaction of the IT industry, including the companies that had been created to fulfil the home computer initiative objectives by facilitating the supply of computing equipment to both public and private sector enterprises, many of which will go out of business if the provision goes through. The Government's regulatory impact assessment, which was rushed out just last week in response to the furore over this issue, admits that, exceptionally, no small firms impact test has been carried out in this instance, although that would usually be the procedure. It also notes in paragraph 62, in classic Whitehall jargon:
	"HMRC does expect there to be an impact for HCI providers. Particularly those in the small business sector that have been set up specifically to provide HCI schemes . . . will be impacted more significantly in the short term than businesses with more diversified business models".
	The IT industry body, Intellect, put it more succinctly after the Budget:
	"There are about 2,000 individuals working in this industry that Gordon Brown has just signed redundancy notices for".
	Before Ministers seek to accuse anyone of crying wolf in this matter, I have to inform the House that the programme of redundancies in the companies established to support the HCI initiative has, unfortunately, already begun. Last month, Red PC became the first company to fall victim to the abolition of the HCI when it was reported that it was about to call in the liquidators. On 24 April, another company, Encompass, announced that it was closing down. As the managing director subsequently told the press:
	"As a small company solely involved in providing HCI, I was completely knocked back by the Chancellor's decision. The government's Digital Strategy sets targets for 2008 so I thought the HCI scheme would run until then, and at the very least we would have 12 months notice. To be given 15 days is appalling."
	At a time when unemployment is unfortunately on the rise again, it will be a great shame to see further high-tech companies going into liquidation if clause 61 remains in the Bill.
	Most importantly, Mrs. Heal, millions of people across the country who might have been able to take advantage of the scheme to improve their and their families' IT skills are now to be denied that opportunity. The Chancellor will now disappoint them if the scheme is withdrawn. Moreover, even those on the existing scheme will be allowed to benefit from it only until whatever agreements they have reached with their employers have expired. That is confirmed by paragraph 71 of the regulatory impact assessment:
	"Changes to the exemptions for computers and mobile phones were announced in the Chancellor's Budget statement on 22 March 2006 and will take effect from 6 April 2006. However those people already participating in schemes based on the law as it applied prior to 6 April will not be affected until the period of their current agreement expires and they enter into a new agreement."
	In other words, at that point they will be caught by the changes. Even the 500,000 people who are benefiting now will not do so for much longer, once their individual agreements with their employers expire.

Mark Francois: In a moment.
	I come to an important point—the definition of "not significant", which the Paymaster General briefly addressed in her introductory remarks. If the existing exemptions are removed by clause 61, an associated issue arises; how computers provided by employers to employees will be taxed. As the RIA states at paragraph 22:
	"If significant private use is made of a computer provided for business purposes a tax charge will arise on the private use element based on the value of the computer and the extent of the business and private use. Employers will also be liable to Class 1A National Insurance contributions."
	That could lead to a significant compliance burden for employers if they are required to police the extent of private use by their employees. As the British Chambers of Commerce state in The Times today,
	"Businesses have already seen the cost of implementing government regulation rise to over £50 billion since 1998, so to introduce in the small print of the Budget another measure such as this one will further serve to burden employers and impact on their ability to compete effectively."
	The Government have responded by arguing that there will be no tax or NIC liability if such use is deemed to be "not significant", but have not clarified how that will be defined. If clause 61 remains part of the Bill, it is vital that that is clarified so that both employers and employees know where they stand.
	The RIA states at paragraph 73 that HMRC will
	"invite employer representatives to work with them as they develop guidance which will articulate their approach for handling compliance and administration issues that flow from the changes announced in the Budget."
	I think I heard the Paymaster General reiterate, but I will ask her to repeat beyond peradventure in her winding-up speech, that the Government are planning to consult industry so that they can clearly define "not significant" and the matter can be clarified once and for all.
	If that is the Government's intention, can the Paymaster General estimate how long the process will take? For instance, does she anticipate that it will be concluded successfully by July, as suggested in paragraph 74 of the RIA? Even better, if clause 61 were removed from the Bill, the current exemptions would remain in place and the issue would not arise. As The Times argued this morning in a leader sub-titled "The Treasury sends another nasty message to business",
	"Treasury officials have promised to take a 'practical' view of how much private use should be regarded as 'significant'. The most practical approach, when the issue is debated in the Commons today, would be to withdraw it. We are watching."
	That is another good reason for deleting clause 61. I shall now give way to the hon. Member for North Swindon (Mr. Wills).

Rob Marris: I thank the hon. Member for Rayleigh (Mr. Francois) for his speech, a large part of which was thoughtful, although he will not be surprised to learn that I disagree with much of what he said. If clause 61 passes into law, computers provided for use at home solely for business purposes will continue to be allowed, and I shall return to that point.
	The hon. Gentleman accepts that times change. The Paymaster General has said that the take-up rate for the HCI scheme in the first four years after its introduction in 1999 was 29 per cent. and that it then fell to 4 per cent., which shows the operation of the law of diminishing returns. I know that the hon. Gentleman was not a Member of the House in 1999, but I strongly suspect that his party failed to support the HCI when it was introduced and when it was reviewed in 2003—he can correct me on that point, if I am wrong. He, along with the hon. Member for Mid-Worcestershire (Peter Luff), now supports the HCI, and the thrust of his speech seemed to be that times change and that the scheme has reached lift-off.
	It is true that times change, but we must put the matter into context, which the hon. Gentleman addressed only at the beginning and end of his speech when he discussed India, China and globalisation. He issued a challenge to the House, which I shall answer. The hon. Gentleman, and most Conservative Members in the Chamber, want to retain the HCI, because it is an attempt to upskill our society.
	The Government have spent a huge amount of taxpayers' money on trying to upskill our society, and they continue to do so. I will not reel off the figures, because we have all heard them, but Labour Members agree that that spending was certainly correct, whereas Conservative Members are somewhat divided. For example, the educational maintenance allowance was piloted in my constituency, and, although I cannot prove it, I posit as cause and effect the fact that staying on rates at 16 greatly increased. That measure involved investing a lot of money in a long-term process of upskilling our economy, which is the context in which we need to understand the HCI.
	The hon. Gentleman mentioned the trade union learning fund. I served in the Committee that considered that legislation, where Conservative Members opposed it. The trade union learning fund has been very successful as part of a mosaic of measures to upskill our economy. The HCI was part of that mosaic, and the Government now say that they would rather that other things were part of it, too.
	As far as I am aware, the HCI did not cover students or pensioners, unless they happened to be in paid employment. As part of the mosaic of upskilling, the Government have been pouring computers into schools. All hon. Members visit schools in their constituencies— I am sure that you have done so in the west midlands, Mrs. Heal—where interactive white boards have been installed, many teachers have been provided with laptops, and increased numbers of computers have been made available to pupils. Indeed, some schools in Wolverhampton are successfully piloting the use of personal digital assistants—I do not know whether PDAs fall within the category of computers, because, as my hon. Friend the Member for North Swindon (Mr. Wills) has said, technology moves on so quickly.
	Shortly before the Budget, the hon. Member for Rayleigh asked about support for the scheme by the Department for Work and Pensions and the Department of Trade and Industry. However, the Budget included a lot more money for education, and what is known in the vernacular as "Brown money" consists of money that goes directly to schools—from memory an average secondary school can receive up to £198,000 in the following financial year. It is surprising that the hon. Gentleman has suggested that the abolition of the HCI is simply an act of desperation by the Chancellor, because the Budget included far more extra money for education, which affects skills both directly and indirectly, than will be saved by the abolition of the HCI. The further education White Paper was produced at the beginning of March, and adult learning grants allow people to upskill to level 2 and under-25s to upskill to level 3. The HCI was part of that mosaic of upskilling.
	Whether Conservative Members like it or not, those taking advantage of the HCI disproportionately consisted of higher-rate taxpayers. As my hon. Friend the Member for North Durham (Mr. Jones) has pointed out, that is not the case in absolute numbers, but it is true proportionally. In round terms, higher-rate taxpayers make up about 10 per cent. of taxpayers, but they made up 25 per cent. of those who benefited from the scheme. That is not to say that we should abolish the scheme just because higher-rate taxpayers benefited disproportionately, but it is worth bearing that point in mind against the backdrop of where the Government want to go on skills provision. We must consider the HCI in that context.

Philip Dunne: I am grateful to you, Mr. O'Hara, for allowing me to contribute to this debate. This is a novel experience for me on two counts. This is the first time since joining this House that I have attended a debate in which the Government are insisting on scrapping a successful measure; in my experience, they usually seek to abandon failed initiatives that they have introduced during their tenure. To witness them abandoning a successful one is surprising, to say the least.
	I am pleased that the Paymaster General has an opportunity today to diffuse criticism of this penny-pinching, revenue-retaining measure by making a positive announcement on digital inclusion. In my experience, the Paymaster General is usually asked to defend the indefensible on the Chancellor's behalf, but today she is able to announce some good news. However, it is a classic new Labour move: on the one hand, we are debating a measure, the withdrawal of which will save the Treasury £300 million over three years; on the other, Labour is sweetening the pill with a £50 million new initiative, but it is merely a sleight of hand to try and distract attention from the bigger issue.
	Having said that, I welcome the digital inclusion initiative and I should like to comment briefly on it, given that the Paymaster General introduced it into this debate. I hope that the new cross-departmental unit will address the severe shortcomings of the digital TV footprint. It is claimed that digital TV will reach 98.5 per cent. of the population. Given that the Paymaster General has taken an interest in this subject, I will send to her and to whoever is responsible for running the new unit a map that the Shropshire Star helpfully provided. It shows the area along the Welsh marches that would be excluded from digital TV coverage. That area includes most of the western half of my constituency and all the area classified as an area of outstanding natural beauty, which amounts to about 80 per cent. of south Shropshire district. I look forward to hearing about the measures that this magnificent new unit will implement to provide coverage for my constituents.
	I want to speak to amendment No. 2 to clause 61. The home computing initiative has encouraged home-working, and before I illustrate this issue with some comments about my constituents, I want briefly to highlight some of the non-financial benefits that derive from home working of which the Paymaster General may not be aware. BT, one of the largest employers in the country, has undertaken research among its work force. It states:
	"People working from home are 7 per cent. happier than their office-based colleagues".
	So there is a happiness quotient to this issue. The research also noted that there is
	"20 per cent. less absenteeism than the national average"
	among such people, on account of BT's home-working policy. These non-financial but none the less important factors are being put at risk by this penny-pinching Government measure. There are 8 million people working from home, who—

Colin Breed: I agree with most of what the hon. Member for Fareham (Mr. Hoban) said. We all agree that small business are our genuine potential for the future. The Government and perhaps previous Governments have gone wrong in not genuinely enabling small business to grow in the way we all want them to. Plenty of new businesses have started up but plenty have regrettably failed relatively early. Tax plays a significant part in that.
	Governments in recent times have attempted to change tax rates and the way in which they support small business. We have all largely tried to support the Government's intentions. However, although we are creating small businesses, we do not sustain them for a reasonable period so that they can grow into medium-sized businesses. Far too many fail and far too many are swallowed up by larger competitors. The nurture and support that small business needs to provide the strong economy that we want has not happened. Perhaps it is indicative that tax regimes have changed and we have not got the stability for people to plan properly. Anyone who has started a small business will recognise that the first three to five years are the toughest time. The stability of the taxes that they have to pay is extremely important if they are to plan for the growth that they need. While we applaud the simplicity, we must implore the Treasury to provide stability as well.

Energy Review (Human Rights)

Vera Baird: As the gas price spiralled ever upwards last winter and spring, the disadvantages of our future dependence on that fuel became increasingly obvious. They were clear to the ordinary domestic consumer paying a highly inflated bill, obvious to the point of depression in the Government-supported anti-fuel-poverty sector, and painfully transparent to energy-intensive users, such as the petrochemical businesses in my Redcar constituency. Several of the petrochemical firms, which, together, provide a big slice of the north-east's gross domestic product, had to idle plant and limit output in favour of non-UK locations, and, in one case, temporarily close. The huge hike in those energy costs is likely to have longer-term effects, such as the delay, or even abandonment, of industrial investment in the chemical sector, all of which will be made much worse in the absence of speedy action to guard against a recurrence of the price hike next winter.
	The cause of the problem is at least partly the impact of the early liberalisation of the UK energy market ahead of that of the rest of Europe. However, additionally, we are moving more quickly than anyone could have predicted from supplying our own energy, which we have done for the past 100 years, first from coal and then from North sea oil and gas, to potentially becoming dependent on Russia, Algeria and the middle east for gas.
	The problem of relying on Russia, which was previously regarded by the west as a reliable energy source, became especially clear to Ukrainians on new year's day when the Russians cut their supplies. However, the ripple effects were felt thousands of miles away. Not only did France lose a third of its gas, but the whole of Europe, which relies on Russia for a quarter of its supply, was forced to realise that there are serious limits to the length of the spoon that can be used when supping with President Putin. Clearly he will readily use his abundance of hydrocarbons for political purposes, in this instance to punish the western-leaning Ukraines for considering joining NATO and the EU and to force them back into Russian hegemony
	Our dependence on Russian gas looks set to grow. Russia has 28 per cent.—the largest share—of the world's natural gas resources. Given that, should we ask what sort of a country is President Putin's Russia? According to Amnesty International, Russia has an abysmal human rights record. According to Freedom house, another human rights non-governmental organisation that assesses countries across a range of rights and issues as free, partly free or not free, Russia has declined from partly free to not free in the past two years. It says that Russians cannot change the Government democratically because the state's far-reaching control of the broadcast media and the growing harassment of Opposition parties make that impossible. There was strong evidence of an undercount in the vote for Opposition parties in the last election that kept them from attaining the 5 per cent. threshold required for parliamentary representation. Corruption is pervasive and libel laws are used to intimidate the independent media. Putin has just taken power to appoint the judges.
	According to the annual human rights report from the US State Department, Parliament in Russia
	"has been virtually stripped of power."
	There is
	"selectivity in the enforcement of the law and . . . there is harassment of some non-government organisations."
	It is a statement of the obvious that the history of Saudi Arabia and the rest of the middle east shows how difficult Governments find it to be other than indulgent to countries that are rich in energy. Middle eastern countries are, of course, significant gas suppliers. Levels of dependency on a country for energy supplies tend to make purchaser Governments significantly less prepared to challenge the supplier Government's democracy and human rights record, even though we and other western European countries assert that these values are key ones to be supported in foreign policy.
	Europe's only really viable alternative source of gas is Algeria, which is fourth in the world as a gas exporter. However, Algeria, too, has serious human rights problems with Freedom house reporting that the right
	"of Algerians to choose their government freely is restricted".
	Although the recent presidential elections were an improvement it is still reported that
	"the president wields minimum leverage with the small group of generals who retain ultimate power."
	Demonstrations are banned in Algiers while in other areas, peaceful demonstrations have been broken up, sometimes violently. The Algerian alternative source of gas does not seem to hold a better promise of contracting with a clear human rights conscience.
	President Putin has recently engaged in a fruitful piece of diplomacy in this direction. He signed a contract for Russia to supply missiles and fighter aircraft to Algeria. Payment for these is so arranged that Russian influence is now woven deeply into the Algerian energy sector. At the same time, President Putin has tightened his monopoly of the gas transit route from the Caspian and central Asian regions, building up, therefore, a double or a triple potential stranglehold on European gas supplies.
	It is noteworthy that it was Russia that was free to supply enriched uranium to Iran to limit concerns about nuclear weapons proliferation in that country. Iran has the second highest natural gas reserves in the world, behind only Russia, and there are emerging concords in the energy sector between these two countries.
	Recently, the Kremlin controlled Gazprom indicated a wish to bid for Centrica, the UK's largest domestic supplier, which sells gas to 40 per cent. of British homes. Success would secure UK demand as well as supply for the Russians, who are not yet big players in the UK. It would be a surprising outcome if, as the UK energy market is liberalised primarily to create competition, it became dominated by a state-owned corporation, and not even a British one.
	Is it any coincidence that as Russian democracy and human rights are forced downwards and Putin simultaneously extends both his own tentacles of energy supply and his influence over other countries with large gas reserves, that the largest investment currently being made in nuclear power is at Olkiluoto in Finland, which as a country famously shares a common border with Russia and whose domination by the Soviets during the cold war gave rise to the description of oppressive hegemony as Finlandisation?
	The fact that we are timid about energy suppliers' human rights obligations should not be a surprise when one considers the temptations. Energy is vital to modern economies, and problems with supply have been the basis of some of the most important events in recent history, including the global recession in the early 1970s after the Organisation of Petroleum Exporting Countries cut supplies and, in the UK, the miners' strike of 1974 that brought down a Tory Government and the strike in the 1980s that did not do so. Ultimately, the 10-year war between Iran and Iraq, and the two more recent wars in Iraq were strongly linked to, if not determined by, reliable energy supplies.
	In addition, energy-rich countries have a great deal of buying power, and can offer lucrative contracts for western know-how effectively to extract resources from the ground or the seabed. Gazprom is keen to secure western technical help further to develop Russian resources. Those countries are often ready to purchase sophisticated arms from the west, which are necessary to shore up their security and protect the status quo. As chair of the all-party group on Burma, I know the power that hydrocarbons can give despotic Governments. European efforts to isolate the despicable Rangoon junta are constantly foiled by the French, whose oil company, Total, is the regime's largest corporate funder. Incidentally, that has led to the unacceptable belief that the Bush White House operates a more effective sanctions programme against Burma than the EU. The Burmese Yadana gas project, in which Total and the junta are partners, earns the regime up to $450 million a year, which it spends on boosting the military suppression of its citizens and which it uses as an aid to laundering drugs money for the purchase of foreign arms.
	Although we do not buy hydrocarbons from Burma, that country's history teaches us another truth. Countries with immense natural resources may have lopsided economies. A sudden inflow of dollars as prices rise can lead to an appreciation in domestic currencies, making non-energy sectors uncompetitive in the world and removing incentives to develop other industries, thus confirming the domination of oil and gas. The resource is concentrated so that cash passes through few hands and can easily be misdirected. The inherent instability of commodity prices impacts mostly on the poor, who do not have any way of hedging the risk. Such countries rarely have stabilisation policies to set aside surpluses to cushion the blow when prices fall. Indeed, there are few internal pressures in such countries to govern well at all, because those money flows mean that there is little need to raise revenue through taxes, so there is little need to secure the consent or support of their people, who have little leverage to call their rulers to account.
	Oil and gas extraction do not require large teams of highly skilled indigenous workers, so the individuals in charge see little point in investing strongly in education, welfare or health. Indeed, they do not require huge numbers of unskilled workers. Many such countries grow slowly and do badly on the UN's human development index. Countries with strong institutions can benefit from the wealth that great natural resources bring, including Norway, which has about 1 per cent. of world gas reserves, and, historically, Britain. Both countries had a strongly entrenched representative democracy, freedom of speech and association, as well as the rule of law, long before they realised that they had hydrocarbons. None of the countries in the top five for gas reserves are classified by Freedom house as free.
	Clearly, relying on such countries for our gas supplies can bolster unacceptable regimes and ensure that their citizens pay a high human rights and democracy price even as we pay a high financial one. Ultimately, the dangers and instability to the world from human rights abuses mean that the price that everyone pays is extremely high. Happily, that understanding appears to be compatible with the direction of Government policy. The energy review was partly initiated as a result of the UK becoming a net gas importer sooner than expected and the newly appreciated risks of an unreliable supply.
	There are genuine gains to be made from renewable technologies using wind, wave and solar power. Clean-coal technology and carbon sequestration for coal and North sea oil have a future, while efficiency measures to reduce demand for energy are vital too. Campaigners protest that a fully committed Government should push through much stronger action on renewables and energy efficiency, but such measures often involve major changes to people's lifestyles and are hard to deliver. For example, wind farms are widely opposed because of their impact on the local environment. A proposed offshore wind farm in Redcar is deeply unpopular, because it is less than a mile from the shoreline of our main tourist bay. The proposed onshore wind farm at the steelworks is acceptable to everyone, however, because it is part of the industrial landscape. In a similar way many people resist microgeneration windmills on houses, recently exposed as dangerous and difficult. Wave power may have environmental problems, and the technology for carbon sequestration is only in its early stages.
	The technology that should not be overlooked in establishing what is likely to be a mix of energy supply is nuclear power. At present it contributes about 19 per cent. of our electricity needs, but that could fall to 7 per cent. by 2020. Meanwhile, the Government's target for renewables, which many consider to be optimistic, is for an increase in renewable power from 3.4 per cent. to 20 per cent. by the same date, 2020. These figures show how the majority of the effort that we put into reducing CO 2 emissions through renewable energy is in danger of being wasted if old nuclear power stations are not replaced.
	Importantly for human rights concerns, nuclear fuel can be bought in ways that do not endanger human rights in the same way as gas. It mostly comes from Canada and Australia. Clearly, nuclear power has problems, particularly its waste, though a recent draft statement from CoRWM, the Committee on Radioactive Waste Management, envisages a deep underground repository which it describes as safe and
	"a fair burden to pass to future generations".
	Its chair added:
	"We have looked at whether the options on our shortlist could accommodate new-build wastes and concluded that they could".
	Early indications are that the petrochemical industry, as represented by businesses in Redcar, might be willing to support capital investment in nuclear power generation in return for very important stability of supply in the long term.
	We should hope that the energy review can find workable solutions so that we can continue to benefit from a relatively affordable carbon-free energy source and so that, by expanding our gas purchasing from unacceptable Governments, we do not simultaneously make the world a worse place both for climate change and for human rights.

Malcolm Wicks: I thank my hon. and learned Friend the Member for Redcar (Vera Baird) for the opportunity to discuss the important issues of human rights and the current energy review. It seems that only recently she and I were discussing equally important questions about women and pensions.
	The Government take human rights very seriously and I am proud of the work that we undertake. As a developed country, with a well-established representative democracy, we have a duty to promote good human rights in all interactions that the UK has with other countries.
	Energy policy is a truly international issue, as events every week demonstrate. Even though the UK has a large natural resource in oil and gas reserves in the North sea, imports remain an important element of our energy mix. In the future, our imported energy will come from a wide range of sources—oil from Denmark and Venezuela, and gas from Norway, Qatar and Algeria, for example. Furthermore, some of the world's leading extraction companies, such as BP, BG Group and Shell, are based in the UK. As such, they share the responsibility for protecting human rights wherever they are operating.
	As my hon. and learned Friend made clear, the way in which countries use their energy resource is an important issue for the whole international community. It was for this reason that in 2000 the UK and US Governments established a set of international voluntary principles on security and human rights. These are designed to help companies to meet the requirements of their international operations, while respecting the human rights and fundamental freedoms of those in the host country.
	We have continued to work with British companies to promote and expand the work of the voluntary principles initiative. I am pleased to see that those principles have formed the cornerstone of those companies' approach to security and human rights in the countries in which they operate. The initiative is also backed by a number of non-governmental organisations, such as Amnesty International and Human Rights Watch.
	We are also committed to the Organisation for Economic Co-operation and Development guidelines for multinational enterprises. These set out guidelines on responsible business conduct for all companies based in the UK. The guidelines cover areas such as combating bribery, environmental protection and public health and safety. Stable and successful producer countries are crucial for the international community's long-term energy security. The best way to ensure such long-term security is to ensure that the revenues raised from oil are transparently accounted for and used to benefit the people of those countries.
	Through the extractive industries transparency initiative, we are working with Governments in resource-rich countries to improve such governance through the publication and verification of company payments and Government revenues from oil, gas and mining. Some 20 countries—for example, Azerbaijan and Nigeria, which are significant players in the global liquefied natural gas market—have either endorsed or are now actively implementing that initiative, and other countries that are global suppliers of uranium, such as Niger, have also endorsed the initiative. We are encouraging emerging markets—for example, China, India and Brazil—to support the initiative's implementation in resource-rich countries and by their companies, whether state owned or otherwise. Russia could play a leadership role with those economies.
	Our indigenous supplies of energy have declined sooner than expected. We are already a net importer of gas and expect to be a net importer of oil by 2010. There is no doubt that whatever is decided by the energy review, to which my hon. and learned Friend has referred, the UK will be importing significantly more oil and gas in coming years from a range of countries around the world, but heightened concern about global energy issues are affecting perceptions of the security of supply from major exporter countries. Reliance on imports is not per se a threat to security of supplies. Indeed, all other G7 countries, with the single exception of Canada, have been in this position for many years.
	Securing our energy supplies from a diversity of countries by a number of different routes is an important factor in our energy policy. We are not putting our eggs all in one basket, because diversity helps us to maintain reliable supplies and mitigates the risks of any interruptions. Oil and gas come to the UK from a variety of countries, but a significant proportion of our current oil and gas imports come from Norway—for example, 72 per cent. of oil imports and 80 per cent. of gas imports. Countries such as Germany, the Netherlands and Belgium are also suppliers.
	The market for liquefied natural gas, which can be shipped like oil, is expanding significantly. The UK expects to receive the first supplies of LNG from Qatar by the end of 2007. As the LNG market becomes more global, it is possible that the UK will receive shipments from other producers such as Nigeria and Egypt. That diversity will help to continue our strong record for the continued physical supply of gas and electricity to end users. We have had fewer unplanned interruptions to electricity than any European country except the Netherlands. The expansion of renewables, to which we still remain committed, is further adding to our diverse generating mix.
	We have also been working with the energy intensive users group, which includes the Chemical Industries Association, during the past winter. Our efforts have been focused on maximising gas and electricity supplies, encouraging demand-side response and pursuing fair access to markets across Europe. We are also working with Ofgem, national grid and industry over the summer to ensure that we are in the best possible position ahead of next winter. However, we need to ask ourselves whether we are doing enough to manage the risks of this new situation into the future. That is one of the reasons why the Prime Minister asked me to lead a review of UK energy policy.
	We must ensure that the right framework is in place to help the market to deliver our medium and long-term energy policy goals. The review is therefore looking at the overall framework and within that ensuring reduced carbon emissions, attaining reliable energy supplies, examining the role of nuclear and assessing the potential of carbon abatement and low carbon technologies. In addition, the scope for improving energy efficiency is subject to the review, including achieving affordable and adequately heated homes for the most vulnerable.
	There are no foregone conclusions in the review, but there is one thing that I am sure of—there is no single solution and no do-nothing option. We have just finished the formal consultation as part of the review, and the scale of the debate has been impressive. We have received many more than 2,000 responses to our consultation and I have met more than 500 different stakeholders through our extensive programme of seminars, round tables and other activities, from which three key messages have emerged. First, the objectives of the 2003 White Paper are the right ones, and a review for the long term is the right decision. Secondly, there is a need for greater long-term clarity about the direction of UK energy policy. Thirdly, there is a need for action on both energy demand and energy supply.
	Everyone, whether in Government, in industry or as an individual, has an important role to play in taking action to meet our energy policy goals. We are analysing the evidence that we see from the consultation and further considering the policy options that the review might recommend. We must continue to provide a framework in which the UK market can supply UK energy requirements while at the same time, of course, having regard to human rights considerations, including through our support of the voluntary principles.
	I thank my hon. Friend for the opportunity to discuss these important global issues in the House tonight.
	Question put and agreed to.
	Adjourned accordingly at half-past Ten o'clock.

CORRECTION

27 March 2006: In col. 581, second paragraph, after "practice population of" delete "20,000" and insert "2,000".